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Alabama House Members Calling for Review of RSA Performance

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

Alabama House member Jim Patterson (R) from Meridianville is calling for an outside audit of Retirement Systems of Alabama investment performance. Rep. Patterson said, in an exclusive interview with the Alabama Political Reporter. “We are not getting good information.”

Rep. Patterson said that during the last ten years Retirement Systems of Alabama has been one of the worst performing public pension funds. Those numbers are based on valuations set by auditors hired by the RSA. In the last fifteen years, the Alabama state teachers’ pension fund has invested heavily in hard assets like commercial real estate, Alabama TV stations, Alabama newspapers, golf courses, and a box car factory. Valuing real property like real estate and businesses is an inexact science and Patterson questions the methodology used by RSA.

“Commercial property has been the worst performing investment of the last five years.” Rep. Patterson questioned the real values of RSA’s holdings and says he suspects that the numbers could be worse than what RSA is reporting to the public. Patterson said that he fears that this could “the biggest scandal in this state (Alabama).”

Alabama House of Representatives member Blaine Galliher (R) from Gadsden says, “There is this erroneous assumption that Dr. Bronner is doing an excellent job. Maybe early on he did, but he hasn’t in the last ten years.” Dr. David Bronner has been the CEO of Retirement Systems of Alabama, which manages the pension funds for Alabama’s teachers, state employees, and state judges since 1973.

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Galliher wrote on his Facebook account: it is “important that all read this article and realize, there is no such thing as “too big to fail.” I am not advocating taking over RSA–BUT–we put in close to $1 billion to shore up the RSA last session and it is anticipated that we will have to put in over $1 billion for 2013. That is money that could be used for raises, equipment, buildings, technology, and many other needs. This is real. I am really aggravated about those that advocate Bronner as the best thing since sliced bread, when for the last ten years RSA has been in the bottom 10 percent of retirement programs in the U.S. Again, I do not want to take over RSA but it is $1 billion of taxpayer money that should be going to the educational system and employees. I do think it is time that there be an accounting to the taxpayers since it is their money. If you are a public employee it is your money that is at stake. All I am asking for is answers to your return on investments and your retirement future. Again, not wanting the legislature to “take over” RSA as being purported but I do want some answers to tough questions like how much are the golf courses making? Why wasn’t there a prior lease on the rail car plant? Why did we continue to buy stock in USAir when we knew it was going bankrupt? I am not a financial genius but I too have an investment in this issue.”

By Alabama law, when RSA does not return at least 8 percent on its’ investments, the Alabama taxpayers have to pay in to the RSA to make up for the poor performance of RSA’s investments. This money is taken from the Alabama Education Trust Fund. Last year, the state legislature increased the amount of contribution that teachers paid into their retirements. Rep. Galliher said that this was due to the poor returns of RSA’s investments. Rep. Galliher said that when Dr. Bronner began diversifying into newspapers, television stations, and golf courses performance declined. Alabama House member Galliher says that the taxpayer money that the state legislature will have to use to shore up RSA could and should have been used in the classroom. “We are at the bottom versus other states. I would like to see some accounting. The teachers have not gotten raises in years. Every dollar is important.”

Alabama House member Jim Patterson says that RSA has a “fiduciary responsibility to the teachers” whose pension funds that RSA manages. “His fiduciary responsibility is not industrial recruitment.” Patterson said that Dr. Bronner has made several investment decisions to increase political power rather than to get the best return for Alabama’s teachers. Rep. Patterson cited as examples: RSA’s purchase of Community Newspaper Holdings, which owns over 100 small newspapers including some in Alabama and RSA’s ownership of Raycom Media which owns over 40 television station in the Southeast, including Fox 6 in Birmingham and Channel 12 in Montgomery. Patterson said, “The reason they own the TV stations is political power.”

Rep. Patterson questioned the close relationship between Dr. Bronner and RSA and the teacher’s union (AEA) run by Executive Secretary Paul Hubbert until his recent retirement,. Paul Hubbert in addition to his duties at AEA as Chairman of the Board of the Teacher Retirement System and the Public Education Employee’s Health Insurance Plan (PEEHIP) Board of Control, Patterson said that “AEA is the political arm of RSA. If you ask the average teacher, they will say that David Bronner is doing an excellent job because that is what they read in that little paper AEA puts out (the Alabama School Journal). The truth is he hasn’t. Dr. Bronner has been allowed to do whatever he has wanted to do” and for the last fifteen years he has not performed.

Both Representatives Galliher and Patterson were also critical of Dr. Bronner’s decision to invest $625 million in building a railroad car factory in Colbert County. Navistar has recently announced that they would lease the plant that RSA built.  Rep. Galliher estimated that the RSA has lost over $300 million on that investment.

David Bronner also used RSA funds for a leverage buyout of the airline USAir. Eventually, USAir ended up in bankruptcy and an estimated $300 million of pension fund was lost.

Rep. Patterson said that “AEA blames Republicans” for declining teacher take home pay. “They should be blaming Dr. Hubbert and Dr. Bronner for propping up their little empire.” Rep. Patterson was also critical of a contract that RSA has with a law firm in New York. According to Rep. Patterson, Dr.Bronner’s son is the highest paid lawyer at that firm on that contract. Rep Patterson said that Dr. Bronner and his staff, including Mark Reynolds, pay should be based on investment performance and not be paid direct salaries….salaries Rep. Patterson called “exorbitant.”

Rep. Patterson said that he did not favor giving the legislature control of RSA but said that the state “needs an independent investment guy” running RSA and the RSA “need to make money.” ”You can make money in any market. Hubbert and Bronner are running RSA. The RSA manager ‘needs to get the best he can get for the teachers.’”

Rep Patterson said that the state needs a report to teachers and taxpayers about the real health of RSA’s investments. “I would like to see an independent audit. All I want are the facts. Are we doing good, or are we not doing good?”

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Governor

Could leasing be the answer to new state prisons?

Bill Britt

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Some lawmakers expressed alarm when Department of Corrections Commissioner Jeff Dunn revealed at a recent Contract Review meeting that the state was looking to spend $1 billion to build three new mega-prisons.

Less than two years ago, the Legislature rejected a plan by then-Gov. Robert Bentley to spend approximately $850 million on four mega-prisons. Now it seems the prospects of securing funding for a smaller project with a higher price tag is being met with skepticism if not outright revolt.

But there is another way Gov. Kay Ivey’s administration can acquire new prisons without legislative approval.

State governments increasingly are turning to private companies for new prison facilities through a build and lease agreement.

Kansas is moving forward with plans to have CoreCivic Inc., the nation’s largest private prison corporation, to built its new correctional facility and then lease it back to the state. CoreCivic announced it has similar projects in California and Oklahoma and is pursuing partnerships in other states.

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Under the lease agreement, CoreCivic would not operate the facility but would merely act as landlord.

CoreCivic and its rival, GEO Group Inc., are seeing windfall profits under new tax rules enacted by President Donald J. Trump’s administration.

According to a report in Finance & Commerce, “CoreCivic and GEO, the biggest U.S. prison companies, are classified as real estate investment trusts. That means almost all their profits from property-related operations are tax-free as long as they’re distributed to shareholders through dividends.”

Finance & Commerce also found, “The tax rules incentivize CoreCivic and GEO to build and lease detention facilities rather than only manage them.”

Dunn’s appearance at this month’s Contract Review hearing was to receive approval for an extension to a nearly $11.5 million contract with Birmingham-based Hoar Program Management, LLC, to complete a study that would result in a request for proposal to build the three facilities.

Under a lease agreement, a company like CoreCivic will build prisons to the state specifications which is why even under a lease contract, the Ivey administration would need RFP which Hoar is tasked with delivering.

Two lawmakers who spoke with APR on background think that leasing prisons may not be the ideal solution, but it avoids much of the legislative in-fighting that doomed new prison construction in the past.

As one of the lawmakers explained, “During the Wallace era prisons and community colleges were built in specific locations as a sort of patronage system for the Governor’s buddies.”

Gov. George Wallace was known for generous hand-outs to his cronies, and in some cases, this meant building a community college campus or a correctional facility.

“Once a community has a college or a prison they are not going to want to give it up because it means jobs and votes for legislators, county commissioners, and profits for those up and down the food chain,” another lawmaker said.

Also convincing a supermajority of Republican lawmakers to approve a billion dollar bond offering seems unlikely with the Governor simultaneously pushing for a fuel tax increase.

One of the most significant and rarely mentioned accomplishments of the Legislative agenda enacted by the Republican supermajority has been the passage of prison reform bills, which have dramatically reduced prison overcrowding from 198 percent capacity in 2013, to 153 percent in 2018.

A report by the Council of State Governments found, “Alabama state leaders have appropriated $26.5 million in the FY2019 budget to support justice reinvestment legislation enacted in 2015. This includes $18.5 million to hire probation and parole officers and staff and expand behavioral health community-based treatment and services, as well as $8 million to support community corrections programs (CCPs). This appropriation brings Alabama’s total reinvestment between FY2016 and FY2019 to $95.6 million.”

Another result of Legislative intervention is the number of non-violent offenders has been reduced dramatically, going from a prison population of 35 percent non-violent to now under 14 percent. An unintended consequence of not locking up non-violent offenders is a very violent population inside the prisons, making it more dangerous for correctional officers.

While prison funding is up, and the overall population is down over the last four years, the aging facilities and understaffing is a persistent issue of concern.

In Nov. 2017, Gov. Ivey floated the idea of leasing built-to-order prisons. Now, at least a few of her supporters think it’s the time to utilize that option rather than trying to corral lawmakers into supporting a billion dollar bond to built three mega-prisons.

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Corruption

Ethics Commission will hear Marshall/RAGA case on Wednesday

Josh Moon

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The case of Steve Marshall and the $735,000 in illegal campaign contributions will finally be heard by the Alabama Ethics Commission on Wednesday.

Former Alabama Attorney General Troy King told APR on Tuesday that he had received a notice from the Ethics Commission that afternoon notifying him that the complaint he filed against Marshall, the state’s current AG, would be heard at 9:30 a.m.

King said he found it more than a bit concerning that he received the notice less than 24 hours before the hearing, which is being held six days before Christmas when many people are preoccupied and out of town.

“I have great respect for some members of the Commission, and I think they want to do the right thing, but I would be lying if I told you it wasn’t disconcerting to receive this notice at 2 p.m. today,” King said. He told APR that a Commission employee informed him a mistake had been made and the notice had been mailed to the wrong address previously.

King filed the original complaint against Marshall when the two were vying for the Republican nomination for state AG. Specifically, King took issue with hundreds of thousands of dollars in campaign contributions that Marshall accepted from the Republican Attorneys General Association (RAGA).

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Under a 2010 law passed by Republicans in the Alabama Legislature, it is illegal for candidates to accept donations from political action committees (PACs) that mask the original source of donations by donating between PACs. Such a setup would allow, for example, a casino owner to contribute to a PAC, along with dozens of other donors, and those funds be donated to another PAC, which would then donate to the candidate.

By the time the funds made it to the candidate, they were so co-mingled and mixed up that it would be impossible to tell the original source of the funds.

Democrats in Alabama challenged the law, and the AG’s office, headed by Marshall, defended it. In a case that landed in front of the U.S. Supreme Court, Marshall submitted a brief that called the PAC-to-PAC transfer ban one of the last lines of defense for Alabama citizens against a “quid pro quo government.”

The fund from RAGA — nearly three-quarters of a million dollars worth — were at least partially mixed together with funds that were transferred from one PAC to RAGA’s PAC.

In early July, King filed a complaint with the Ethics Commission over the donations. Later, he attempted to get a circuit court judge in Montgomery to block Marshall from using the funds.

The Ethics Commission slow-walked the complaint, and King said that at one point an employee of the Commission told him that it didn’t want to affect the outcome of the elections. King’s restraining order also failed, as the judge determined he didn’t have sufficient standing to rule on the matter.

“Everyone knows what the outcome of this should be,” King said. “The language is plain. It’s right there in black and white for anyone to read.”

Marshall’s defense has generally centered on some version of: RAGA is a federal PAC and is not subject to Alabama laws.

Of course, King and others argue that the law applies to the candidate, who has a responsibility to adhere to Alabama campaign finance laws. Under the PAC-to-PAC ban, there is a specific requirement of candidates who receive donations that violate the ban — they have 10 days to return the donations or face criminal penalties for each offense.

Marshall should face at least five penalties, including for donations he accepted from RAGA after King filed his original complaint.

Of course, the ultimate decision will be left to the Ethics Commission, and most insiders around Montgomery are skeptical — given the events that have transpired so far — that the Commission will find Marshall violated the law.

“I would just ask the Ethics Commission to be very careful with this ruling, because it has the potential to completely annihilate the PAC-to-PAC ban,” King said. “And they would be doing so by completely disregarding the plain language of the law. It is clear what the right thing is.”

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News

Petition calls for state investigation into Alabama 9-year-old’s suicide

Chip Brownlee

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Thousands of people have signed onto an online petition calling for Attorney General Steve Marshall’s office to investigate the death of an Alabama 9-year-old who killed herself earlier this month after what her parents described as racially motivated bullying.

The Care2 petition, which has been signed by more than 24,000, calls for Marshall’s office to investigate whether racist bullying at US Jones Elementary School in Demopolis led the child, McKenzie Adams of Linden, to kill herself and whether the school was aware other students were bullying the black fourth-grader and did nothing to stop.

Demopolis City School has said there were no reports of bullying at the school in connection with Adams, The Tuscaloosa News reported last week. Adams’ family says her death followed months of bullying on the part of her classmates at US Jones, where Adams attended since 2015.

The bullying, the family has said, led an otherwise happy child to take her own life. Police in Demopolis and Linden are investigating the family’s allegations, but the school has maintained they knew nothing of any bullying.

“The Adams family had no reason to lie about McKenzie reporting the bullying, but regardless of whether there was an official report, it’s hard to believe that teachers and school officials didn’t notice such extreme bullying,” the Care2 petition reads. “Especially when several instances of harassment happened during class, not during lunch or recess.”

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The Adams family has said McKenzie told teachers as well as the assistant principal about her bullying, but the school says an internal investigation turned up no evidence of bullying.

“McKenzie Adams should be getting ready to spend winter break with her family. She should be looking forward to some time off of school and perhaps finalizing her letter to Santa,” the Care2 petition. “Instead, her family is getting ready to bury her.”

Adams’ mother, Jasmine, told CBS 42 the abuse appeared to have been racially motivated. She said it was directed against Adams because a white family drove her to school and she had developed a friendship with a white boy.

Linden Police Chief Robert Alston told The Washington Post they continue to investigate the matter. “There’s resistance from parents who don’t want to get their kids caught up in this,” he told The Post.

Eddwina Harris, Adams’ aunt and an Atlanta area TV host, plans to start an organization, the McKenzie Foundation, which she hopes will raise more than $9,000 on gofundme.com to honor Adams, raise awareness of school bullying and prevent future suicides.

Resources for parents with students who are being bullied are available online at www.stopbullying.gov.

Those with suicidal thoughts or with friends or family members who are having suicidal thoughts are encouraged to call the National Suicide Prevention Hotline at 1-800-273-8255.

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Elections

Former congressional candidate Mallory Hagan signs on with “Draft Beto” group

Chip Brownlee

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Beto O'Rourke speaks at a rally in the Pan American Neighborhood Park in Austin, Texas. (Flikr/Wikimedia Commons)

Former Democratic congressional candidate Mallory Hagan, who ran unsuccessfully against U.S. Rep. Mike Rogers in Alabama’s 3rd Congressional District, is joining other Democrats to launch a “Draft Beto” campaign.

The group is focused on raising at least $1 million for a future presidential campaign for Texas Congressman Beto O’Rourke, whose 2018 campaign for Senate against Republican Sen. Ted Cruz sparked national attention. Though he lost against Cruz, O’Rourke’s campaign inspired a number of Democrats who hope a young, progressive candidate like O’Rourke could be the Democratic standard-bearer in 2020.

The $1 million for Beto’s presidential campaign will be raised in the hopes of both convincing him to run and giving him a headstart in the primary.

Former Beto and Barack Obama campaign staffers, actors, social media influencers, a Google employee, a New York state public defender and former Democratic Congressional candidates are the lead organizers of the group.

Hagan, who is one of the group’s co-founders, is one of two red-state Democrats who ran unsuccessfully for Congress in the group. Renee Hoagenson of Missouri’s 4th Congressional District is the other.

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Democratic candidate Mallory Hagan speaks to supporters in Opelika, Alabama, ahead of the November 2018 midterm elections.

“I had the distinct honor of hearing Beto speak while traveling this past year,” Hagan said. “His desire to see positive, progressive policy in America is infectious. Momentum for a Beto presidential run has been building since the Midterms.”

Hagan lost her 2018 bid against Rogers by 26 percentage points, but her campaign was energized by a grassroots movement. The former Miss America was a local television news anchor and activist before launching her congressional bid.

Organizers have set up an ActBlue escrow account, which would transfer any funds raised to O’Rourke’s campaign account if he were to announce one next year. Hagan’s group is one of two draft efforts seeking to push O’Rourke to run. The other, Draft Beto 2020, held a rally last weekend in New Hampshire, an important primary state, Politico reported.

All contributions forwarded to Beto through Draft Beto are treated as contributions from the original contributor and not from Draft Beto, the group said in a press release.

O’Rourke, a three-term congressman from El Paso, has not said whether he will run for president. He initially shut down calls for him to but has since back stepped. He’s said he doesn’t have a “hard date” on when he would make a decision.

O’Rourke’s impassioned campaign included a tour of all 254 Texas counties. He raised more than $70 million in campaign contributions, the most of any Senate candidate in American history and more than $40 million more than Cruz’s fundraising totals. O’Rourke had 1.2 million separate donations.

He received enormous national attention as a political underdog. A large portion of O’Rourke’s contributions, about 38 percent, were from out of state, though more than 40 percent of Cruz’s contributions came from out of state, an analysis by the Dallas Morning News showed.

Though O’Rourke lost by about 2 percentage points, his race was the closest a Democrat has come to unseating an incumbent Republican in deeply red Texas since 1978.

“Our goal is to bring that energy to the surface and build a grassroots movement to Beto a head start in the primary,” Hagan said. “Beto’s experience, passion, inspiration, vision and ability to connect with voters gives him the best chance to win in 2020.”

Other organizers in the campaign include social media influencers like actor Misha Collins and voice actress Tara Strong, who is known for her Powerpuff Girls and Rugrats roles, and Santiago Palomino, who was a field organizer on O’Rourke’s Texas Senate campaign.

Des Moines Register/CNN/Mediacom poll in Iowa that was released over the weekend showed O’Rourke in third. He registered 11 percent support, behind former Vice President Joe Biden and Senator Bernie Sanders, in the important early primary state.

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Alabama House Members Calling for Review of RSA Performance

by Brandon Moseley Read Time: 6 min
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